Come-Clean Corporation produces a variety of cleaning compoundsand solutions for both industrial and household use. While most ofits products are processed independently, a few are related, suchas the company’s Grit 337 and its Sparkle silver polish.

Grit 337 is a coarse cleaning powder with many industrial uses.It costs $1.60 a pound to make, and it has a selling price of $7.80a pound. A small portion of the annual production of Grit 337 isretained in the factory for further processing. It is combined withseveral other ingredients to form a paste that is marketed asSparkle silver polish. The silver polish sells for $5.00 perjar.

This further processing requires one-fourth pound of Grit 337per jar of silver polish. The additional direct variable costsinvolved in the processing of a jar of silver polish are:

Other ingredients	$	0.50
Direct labor		1.36
Total direct cost	$	1.86

Overhead costs associated with processing the silver polishare:

Variable manufacturing overhead cost		25	% of direct labor cost
Fixed manufacturing overhead cost (per month)
Production supervisor	$	3,300
Depreciation of mixing equipment	$	1,400

The production supervisor has no duties other than to overseeproduction of the silver polish. The mixing equipment isspecial-purpose equipment acquired specifically to produce thesilver polish. It can produce up to 2,500 jars of polish per month.Its resale value is negligible and it does not wear out throughuse.

Advertising costs for the silver polish total $2,700 per month.Variable selling costs associated with the silver polish are 5% ofsales.

Due to a recent decline in the demand for silver polish, thecompany is wondering whether its continued production is advisable.The sales manager feels that it would be more profitable to sellall of the Grit 337 as a cleaning powder.

Required:

1. How much incremental revenue does the company earn per jar ofpolish by further processing Grit 337 rather than selling it as acleaning powder? (Round your answer to 2 decimalplaces.)

2. How much incremental contribution margin does the companyearn per jar of polish by further processing Grit 337 rather thanselling it as a cleaning powder? (Round your intermediatecalculations and final answer to 2 decimal places.)

3. How many jars of silver polish must be sold each month toexactly offset the avoidable fixed costs incurred to produce andsell the polish? (Round your intermediate calculations to 2decimal places.)

4. If the company sells 8,700 jars of polish, what is thefinancial advantage (disadvantage) of choosing to further processGrit 337 rather than selling is as a cleaning powder?(Enter any "disadvantages" as a negative value. Round yourintermediate calculations to 2 decimal places.)

5. If the company sells 11,000 jars of polish, what is thefinancial advantage (disadvantage) of choosing to further processGrit 337 rather than selling is as a cleaning powder?(Enter any "disadvantages" as a negative value. Round yourintermediate calculations to 2 decimal places.)